Remortgaging an unencumbered property to help missus buy out her ex

twelvebore

Hi,

The situation I'm in is the following.

I own a house outright which is worth in the region of £100k. It's not rented out, as it's full of all my stuff!

My missus has separated from her ex, they jointly own a house which we've recently had valued by an estate agent, who said it's likely to sell for £155-158k. Their mortgage is currently a little over £97k, so an LTV of 61-63%.

My current thinking of what we'd like to do is the following:

- remortgage her house in our names with a mortgage that just slips under 60% LTV (so ~£94k)
- (re)mortgage my house to raise the equity we need to buy out her partner and pay down her mortgage to that level (probably ~£20-25k all up though that's a bit uncertain at the moment as they haven't finalised the numbers). It's not my intention to rent out the property in the short-term, though I would like to be able to if our circumstances change for the worse.

Does this make sense? Is there anything I should be aware of? Will this raise alarm bells with the lender(s)?

Our combined income is a little over £60k, she has two kids though one is over 18 (do over-18s count as dependents?). She has about £17k in loans, credit cards and overdraft, I have £13k in savings I could call upon (though I'd rather not, rainy days and all that).

Any thoughts about this strategy?

Thrugelmir

twelvebore wrote: »

She has about £17k in loans, credit cards and overdraft,

That will raise alarm bells.

Wouldn't it be simpler to sell the house. Settle the finances and start afresh.

twelvebore

Quite likely it would, but it's the kids famliy home, network of friends in the neighbourhood, etc., we'd struggle to find somewhere comparable in the area.

I'm kind of resisting selling my house as I see it long-term as an asset to be realised 10-years down the line when the kids have left and we want to downsize.

Thrugelmir

twelvebore wrote: »

I'm kind of resisting selling my house as I see it long-term as an asset to be realised 10-years down the line when the kids have left and we want to downsize.

If your not renting your property out. Then its not "earning" anything. In fact its costing you money and will continue to do so into the future. So seems little point in borrowing money and paying interest by remortgaging the property.

GMS

The unencumbered property is not lived in? Is that correct?

If so why not remortgage this property on a Buy to Let and rent it out. That way you could potentially raise enough to pay off the ex and clear the debts. Alongside this process you could apply to be added to the current mortgage, or jointly remortgage elsewhere for your partners property.

This would of course mean you would need to clear the property and rent it.

Trying to remortgage your own property on a non Buy to Let basis and becoming party to another residential mortgage could raise questions.

You are probably better doing a Buy to Let from the start (assuming you don't reside there)

A broker may be worth a chat on this.

twelvebore

Thanks for the replies; I guess you're saying things I know deep-down to be true.

Thrugelmir wrote: »

If your not renting your property out. Then its not "earning" anything. In fact its costing you money and will continue to do so into the future.

Well, yes you're right. It's costing me £200/mo in bills and so on at the moment. There's not really enough space in my missus' house to move in all of my stuff, so rough plan was wait until 18-year-old sprog moves out of her place in a couple of years, then I move in and rent out my place.

Given how long kids tend to hang around these days though this could be a pipe-dream!

GMS wrote: »

The unencumbered property is not lived in? Is that correct?

More or less. I stay there one night a week and she+I go round there a couple of evenings a month for some peace and quiet and a change of scene.

I guess this is an expensive luxury.

Trying to remortgage your own property on a non Buy to Let basis and becoming party to another residential mortgage could raise questions.

Any reason for this, in particular?

A broker may be worth a chat on this.

Yeah, I think you're right.

Thanks again for your input folks!

savingssaver

Hi yes I agree a broker will be able to help you out with some advice, my flatmate has a similar issue with buy to let etc and doesn't know where to start, he contacted a company called blount financial services they are a local broker I think who helped him with his questions etc, may be worth a call to them unless you already have somebody else to sort it for you? Good luck though mortgages can be such a pain! Especially in the current climate! I'm Glad I work in recruitment lol!